INTRODUCTION

Nirmal Bang Securities Pvt Ltd (Nirmal Bang) is amongst the

top full-service broking firm established in the year 1989. It
started as a small localised player and ultimately transformed
into a diverse group in a span of 20 years. The company offers
comprehensive range of products and services to meet the
financial needs of its investors. It is solidly capitalized to meet
the demands of retail clients and sufficiently caring to ensure
that service is not compromised.

History
The Nirmal Bang group of companies were founded by Nirmal
Bang, Dilip Bang and Kishore Bang. The group always believed
in developing retail client network and had wide network of
clients all over India. It started up the DP services and also
added broking into commodities and insurance advisory
services to diversify into allied activities. Thus Nirmal Bang
became a corporate member of BSE with three membership
rights. The company, besides broking is a depository
participant with NSDL and CDSL. Bang Equity Broking Private
Limited was formed in the year 1997. This company also
became the corporate member of the BSE with three
membership rights in the year 1999. The Group was thus the
first in the history of the Bombay Stock Exchange to acquire six
membership rights of the Exchange.

Major Strengths
Professionally driven
Nirmal Bang is a professionally driven organization having
people with diverse professional backgrounds. The blend of
experience, skill and dedication is shared with all clients. The
group has more than 300 well-experienced and efficient staff
to cater to the large clientele base.
Approach
The company focuses on adequate and thorough research on
local and world-wide developments, balancing these with the
astute discovery of intrinsic values, synergies and growth.
Aim
It aims at maximizing returns of its investors depending upon
the investment motive.
Commitment
The Company is committed in providing service at par
excellence
Major Offerings
Nirmal Bang currently offers the full stock brokerage services
in line with the overall strategy of the group. Some of the
major offerings include the following:
Trading in Equities & Derivatives
Equity trading is offered to retail clients through multiple
channels including online trading in the BSE and the NSE, for
cash & derivatives segments. Live quotes, market commentary
and major news are also offered through its website. This
segment contributes a major portion of its revenue.
Trading in Commodities
The group company is a member of India’s premier commodity
exchanges, namely, the Multi Commodity Exchange of India
Ltd (MCX), the National Commodity & Derivatives Exchange
Ltd (NCDEX).
Online Trading
The company offers an online trading portal which is
developed and
maintained by Financial Technologies (India) Ltd.
Depository
Nirmal Bang is a depository participant of NSDL and CDS(I)L. It
offers depository services through an online platform provided
by Apex Softcell.
IPO
Nirmal Bang is also involved in the marketing of IPO’s. It even
offers
information about forthcoming IPO’s, open issues, new listing
etc.
Reach & Access
Nirmal Bang has pan India presence with offices and branches
spread across all major cities and states. Its wide spread
network is further supported by franchisees and more than 200
sub brokers. As on Oct 2007, the company had 180 offices, 242
sub brokers and more than 300 employees.
The company has tie ups with some of the leading IT solution
providers
for constant support and development of its technology set up.
It has about 50 VSATs that enhance connectivity across several
branches and terminals.
Some of its technology partners include Financial Technologies,
Apex Softcell and Reliable Software.
Performance
During the first 10 months of CY07, Nirmal Bang reported
growth across all its major businesses namely; equity and
derivative reporting a growth of 200% and 75% and
commodity reported a growth of 50% respectively. Number of
terminals went upto 800 in 2007. Similarly number of offices
and sub-brokers also underwent a substantial rise.
The company added 15,000 domestic customer accounts in
2007 as compared to 3,000 in the previous year. The E-broking
business also showed 100% growth and it added about 300 e-
broking accounts.

Future Plans
Nirmal Bang plans to enhance its FII and institutional client
base. The company is further planning to enhance its existing
service portfolio by
introducing investor advisory, portfolio management services
and merchant banking services in the near future.
 Introduction about the
company

SPECIALITY
 ABOUT NIRMAL BANG

Founded in 1986 by Shri Nirmal Bang, the Nirmal Bang Group is

recognized as one of the largest retail broking houses in India,
providing an array of financial products and services.
 Our retail and institutional clients have access to products such as
equities, derivatives, commodities, currency derivatives, mutual
funds, IPOs, insurance, depository services and PMS.

 A leading Financial Services & Brokerage House in the Country

 Amongst top 10 Brokerage house in the country in terms of

branches.

 Amongst top 15 brokerage houses by trading volume.

 Member of all principal stock and commodity exchanges in the

country.

 Represented advisory and action committee of stock exchanges and

SEBI.

 All financial Services under one roof.

 Widespread national presence in Retail Brokerage sector

 Wealth of Experience and Penetration in the Indian financial market

 Strong Technological infrastructure

 Extensive Research Support

 Cutting edge technology to ensure world class customer service

 DEPOSITORY SYSTEM

Introduction:

Inherently, Indians are found of possession, which may be flat or

house, financial assets or jewellery. Investors love to hold the physical share

certificates required by them long back. The globalisation of Indian Capital

market has introduced the concept of depository, which deprives the investors

of being proudly possessed with the physical certificates. The principal

function of a depository is to dematerialize securities and enable their

transactions in book-entry form. Dematerialization of securities occurs when

securities issued in physical form, are destroyed and an equivalent number of

securities are credited into the beneficiary owner's account.

The first depository in the world was set up way back in 1947 in

Germany. Depository in India is relatively a new concept as it was introduced

in 1996 with the enactment of depositories act 1996. The use of depository in

India is voluntary or option.

Meaning of Depository:

In India, the Depositories Act defines a depository to mean, "a

company formed and registered under the Companies Act, 1956 and which

has been granted a certificate of registration under sub-section (1A) of

section 12 of the Securities and Exchange Board of India Act, 1992".

The term "Depository" means a place where something is

deposited for safekeeping a bank in which other deposit funds or securities,

usually under the terms of specific depository agreement. Depository means

one who receives a deposit of money, securities, instruments or other property,

a person to whom something is entrusted or trustee, a person or a group

entrusted with the preservation of safe keeping of something. A depository is

an organization where the securities of the shareholders are held in the

electronic form the request of shareholders are held in the electronic form at the

request of shareholders through the medium of depository participant. The

depository holds electronic custody of securities on the settlement dates.

Depository cannot act as depository unless it obtains a certificate

of commencement of business from SEBI. National Securities Depository Ltd.

(NSDL) promoted by IBDLNSE is the country's first depository. Later on

Central Depository Services Ltd. (NSDL) promoted by IDBI. NSE is the

country's first depository. Later on Central Depository Services Ltd. (CDSL)

was promoted by BSE, Bank of Baroda etc.

The Depository System

The depositories are important intermediaries in the securities

market. Depository System is concerned with conversion of securities from

physical to electronic form, settlement of trades in electronic segments,

electronic transfer of ownership of shares and electronic custody of securities.

The system results in instant transfer as compared to 6 & 8 weeks time under

physical mode.

In a depository system, the investors stand to gain by way of

lower risks of theft or forgery, problems of fraudulent transfer etc. Electronic

transfer is faster in comparison to paper work. Stamp duty is exempted and

turns over & liquidity enhances manifold.

The securities are transferred by debiting the transfer's depository

account & crediting the transferee's depository account. The implementation of

the system has to be secure and well governed. The intermediaries in the

system have to follow strict rules.

What's the difference between a depository and a depository

participant?

A depository is a place where the stocks of investors are held in

electronic form. The depository has agents who are called depository

participants (DPs).

Think of it like a bank. The head office where all the technology

rests and details of all accounts held is like the depository. And the DPs are the

branches that cater to individuals.

There are only two depositories in India- the National Securities

Depository Ltd. (NSDL) and the Central Depository Services Ltd. (CDSL).

There are over a 100 DPs.

 ELECTRONIC LINKAGE

ISSUR

EL.LINK
NSDL / CDSL EXCHANGE
(CC/CH)

DP DP

BROKER INVESTOR INVESTOR BROKERS/ CM

Depository Participants:

A depository participant is described as an agent of the

depository. In legal sense, a DP is an entity that is registered with SEBI under

the provisions of the SEBI (Depositories & Participants) Regulations, 1996. As

per the provisions of this Act, a DP can offer depository related services only

after obtaining a certificate of registration from SEBI.

As per SEBI guidelines, financial institutions, banks etc. can

become the participants in the depository. A DP maintains your securities

accounts and intimates the status of your holding from time to time. The

relationship between the DPs and the depository is governed by an agreement

made between the two under the Depositories Act.

In India, Two Depositories Have Got Registration From SEBI.

These are:

1. NSDL – National Securities Depository Ltd.

2. CDSL – Central Depository Services Ltd.

NATIONAL SECURITY DEPOSITORY LIMITED

It is first depository in India, Registered on 7 th 1996 with SEBI

and commenced operations on 8th November 1996, NSDL is promoted by for

major institutions. Unit Trust of India, Industrial Bank of India. National

Stock Exchange, State Bank of India. The depository has now become one of

the critically important institutions providing infrastructure support to Indian

Capital Market. With in a full years of operations, its investor's accounts rose

to 37 lakhs and the number of depository participants connected to it are 189.

This show the spread of awareness about the depository system in general and

NSDL in particulars. The LSESL has approx 30806 accounts with NSDL, and

out of which approx 23498 are active upto 17th July, 2006.

CENTRAL DEPOSITORY SERVICES LIMITED

It is the second depository secured its certificate of

commencement of business of February 9, 1998 from SEBI, CDSL if promoted

by. The Bombay Stock Exchange (BSE) in association with Bank in India,

Bank of Baroda, State Bank of India and HDFC Bank. The BSE has been

involved with this venture right from the inception and has contributed over

willingly to the fruition of the project.

Over 2 years of its operation 14444 depository participants are

registered with it and 77000 investor's accounts. The main objective of CDSL

is to be responsive to user's interest and concern. The LSESL has near about

8026 accounts with the CDSL upto 21st July, 2006.

REGULATIONS OF DEPOSITORIES

DEPOSITORIES ACT 1996

SEBI

SEBI ACT 1992 SEBI (Depositories &

Participants)
REGULATIONS, 1996

DEPOSITORY

Business rules Bye laws Agreement Applicability

of acts/ Regulations
 COMMENCEMENT OF BUSINESS

To get a business commence by depository the following is

required to be performed.

Registration:

As per the provisions of the SEBI act, a depository can deal in

securities only after obtained a certificate of registration from SEBI. On being

satisfied with the eligibility parameters of a company to act as a Depository

SEBI may grant a certificate of registration subject to certain conditions.

Commencement of Business:

A Depository, which has obtained a registration, can start

operations only after getting a certificate of commencement of business from

SEBI. A depository must apply for and obtained a certificate of

commencement of business from SEBI with in 1 year from the date of

receiving a certificate of registration from SEBI.

SEBI grants a certificate if it is satisfied that depository has

depository has adequate systems & safeguard to prevent manipulation of

records and transactions. SEBI takes in to account all matters relevant to the

efficient and orderly functioning of the depository. It particularly examines if:

1) The Depository has a net worth of not less than Rs. 100 lakhs.

2) The Byelaws of depository has been approved by SEEBI.

3) The automatic data processing system of depository have been protected

against alterations, destructions, disclosure of records and data.

4) The network, through which continuous electronic means of

communication are established between depository, DPs, issuers and

R&T agents, is secure against unauthorized entry.

5) The physical or electronic access to premises, facilities, automatic data

processing system, data storage sites and facilities including backup

sites and to the electronic data connecting the DPs, issuers and R&T

agents is controlled, monitored & recorded.

6) The depository has made adequate arrangements including insurance,

for it demnifying the beneficial owner any loss that may be caused by

such beneficial owners by wrong full act default of the depository or its

DPs participants or any employee of the depository.

7) The granting of certificate of commencement is in the interest of the

investors in securities market.

8) The depository has detailed operational manual explaining all aspect or

its functioning including the interface and method of transmission of

information between the Depository, issuers and R&T agents, DPs &

beneficial owners.

9) The granting of certificates of commencement of business in the interest

of investor in securities market.

Rights and Obligations of Depositories

Depository have rights and obligation conferred upon them under

the Depositories Act, 1996, the regulations made under the Depositories Act,

Byelaws approved by SEBI, and the agreement made with DPs, issuers and
their R&T agents.

Every depository must adequate mechanisms for reviewing,

monitoring and evaluating its control, systems, procedures and safeguards. It

should conduct an annual inspection of these procedures and forward a copy of

the inspection report to SEBI. The depository is also required to ensure that the

integrity of the automatic data processing systems is maintained at all times and

take all precautions necessary to ensure that the records are not lost, destroyed

or tampered with. In the event of loss sufficient backup of records should be

available at different place. Adequate measures should be taken including

insurance, to protect the interest of beneficial owners against any risk.

The depository should indemnify beneficial of security of any

loss caused to them due to negligence of DP.

Bye-laws:

The depository is required to make byelaws governing its

operations. The byelaws have to be in conformity with Depositories Act, 1996

and the regulations made there under and need to be approved by SEBI before

becoming effective.

Services of Depository

A depository established under the Depositories Act, 1996 can

provide any services connecting with recording of allotment of securities or

transfer of ownership of securities in a record of the depository. A depository

can provide depository services through DP. Generally the following securities

are eligible for dematerialisation.

 Shares, scrips, stock, bonds, debentures or other marketable security of

allies nature in or other body corporate.

 Units of mutual funds, rights under collective investment schemes and

venture capital funds, commercial paper, certificates of deposit, securitised

debt, money market instruments, government securities and unlisted

securities.

Securities admitted to NSDL depository are notified to all DPs

through circulars sent.

SCHEDULE OF SERVICE CHARGES

Heads Revised NSDL charges

(including service tax)
Annual maintenance charges Rs. 500 (for year)
Annual maintenance charges Rs. 750 (for corporate)
Dematerialisation Rs. 2 per certificate
Rematerialization Rs. 20 per certificate
Market transfer (only on sale side) Rs. 15 per debit instruction
Off Market transfer (only on sale side) Rs. 15 per debit instruction
Pledge Creation Rs. 50 per instruction
Pledge Closure Rs. 25 per instruction
Invocation Rs. 25 per instruction
Closure Rs. 25 per instruction

FUNCTIONS OF DEPOSITORY
 Transfer and Registration:

A transfer is a legal change of ownership of securities in the

records of the issuer. For affecting the transfer, certain legal steps have to be

taken like endorsement, execution of transfer instrument and payment of stamp

duty. The depository accelerates the transfer process by registering the

ownership of entire issue in the name of the depository. Under a depository

system, transfer of security occurs mainly by passing book entries in the

records of the depositories, on the instructions of the beneficial owners.

 Pledge and Hypothecation:

Depositories allow the securities placed with them to be used as

collateral to secure loans and other credits. In the manual environment,

borrowers are required to deliver pledged securities in physical form to the

lender or its custodian. These securities are verified for authenticity and often

need to be transferred in the name of lender. All this takes time. It also has a

money cost by way of transfer fees or stamp. If the borrower wants to

substitute the pledged securities, these steps have to repeated. Use of

depository services for pledging/hypothecating the securities makes the process

very simple and cost effective. The securities pledged/hypothecated are

transferred to a segregated or collateral account through book entry in the

records of depositary.

 Dematerialisation:

One of the primary functions of depository is to eliminate or

minimize the movement of physical securities in the market. This is achieved

through dematerialization of securities. Dematerialisation is the process of

converting securities held in physical form into holding into book entry form.

 Account Transfer:

The depository gives effect to all transfers resulting from the

settlement of trades and the other transaction between various beneficial

owners by recording the entries in the accounts of such beneficial owner.

 Corporate Actions:

A depository may handle corporate actions in two ways. In first

case, it merely provides information to the issuer about the person entitled to

receive the corporate benefits. In other case, depository itself takes the

responsibility of the distribution of the corporate benefits.

 Linkage with the clearing system:

Whether it is separate clearing corporation attached to a stock

exchange, or a clearinghouse of a stock exchange, the clearing system performs

the functions of ascertaining the pay-in (sell) or pay-out (buy) of brokers who

have traded on the stock exchange. Actual delivery of securities to the clearing

system from the selling brokers and delivery of securities from the clearing

system to the buying broker is done by the depositary. To achieve this,

depositories and clearing system should be electronically linked.

RECORDS, WHICH ARE TO BE MAINTAINED BY

DEPOSITORY
 The records and documents, which are required to be maintained

by every depository, can be started as below which have to be reserved for a

minimum period of 5 years.

 Records of securities dematerialized and rematerialized.

 The names of the transferor, transferee.

 A registrar and index of index of beneficial owner.

 Details of the holdings of the securities of beneficial owner as at the end of

each day.

 Details of securities declared to be eligible for dematerialization in the

depository.

 Records of approval, notice, entry and cancellation of pledge or

hypothecation.

 Records of instructions received from and send to participants, issuers,

issuer's agents and beneficial owners.

 Such other records as may be specified by SEBI for carrying on the

activities as a depository.

VARIOUS OPERATIONS PERFORMED BY

DEPOSITORY
Account Opening:

Any investor can avail depository services but first an account

must be opened with a depository participant just as in a bank. Any person

desiring to become a client of the DP shall make an application as per the

forms, which have been laid out in Annexure. The participant shall ensure that

the application form submitted by the client is completely filled & properly

signed by the client.

Types of Accounts

Beneficial Intermediary
owner A/c A/c

Clearing
Member A/c

House Non House

Normal Pool Vyaj Badla House

 A DP may be required to open three categories of accounts for clients –

Beneficiary Account, Clearing Member Account and Intermediary Account.

 A Beneficiary Account is an ownership account. The holders of securities

in this type of account own those securities.

 The Clearing Member Account and Intermediary Account are transitory

accounts. The securities in these accounts are held for commercial purpose

only.

 A Clearing Member Account is opened by a broker or a Clearing Member

for the purpose of settlement of trades.

 An Intermediary Account can be opened by a SEBI registered intermediary

for the purpose of stock lending and borrowing.

Diagrammatic Representation of Account Opening Procedure

Procedure of A/c opening Depository Participant

Client Verification of the details of

form
Fills and
submits the Signatures done on all the
Form places

All documents attached

Gives acknowledgement
DP allows client identification number or
account number and inform the client

Client master list

Contain all the detail which were
Beneficiary Account filled in the account opening form
by the client
This is an account opened by investors to hold their securities in
dematerialized form with a depository and to carry out the transactions of sale

and purchase of such securities in book-entry form through the depository

system. A beneficiary account holder is legally entitled for all rights and

liabilities attached to the securities held in that accounts therefore the account is

called "beneficial owner account". This is further classified as:

1. House Account

2. Non-House Account

House Account: An account opened by a DP for the custody of and

transactions in its own investments is referred to a house account.

Non-House Account: All other beneficiary accounts are referred to as non-

house account.

Clearing Member Account

The entities that are authorized to pay in and receive the pay out

from a clearing corporation/clearing house against trades done by themor their

clients are known as clearing members (CMs). All pay-in and pay-out

transactions are carried out through their accounts.

1. All members of a stock exchange popularly known as brokers, are

clearing members;

2. Custodians who are permitted by the stock exchange to act as a clearing

member.

Intermediary Account

As per SEBI Regulations on Stock lending and borrowing, only

an approved intermediary can lend and borrow stocks from clients. This

intermediary borrows from lenders and lends to borrowers. Intermediaries

registered with SEBI as approved intermediary may open an intermediary

account with a DP of its choice, for executing stock lending and borrowing

transactions made through them. An intermediary account may be opened only

after obtaining registration from SEBI under an approved Stock Lending

Scheme, and getting the approval of the depository for opening the account.

The process of opening an intermediary account is same as for opening a

corporate beneficiary account only as per the procedure prescribed for this by

the depository.

Freezing of accounts

Account freezing means suspending any further transaction from

a depository account till the account is de-frozen. A depository account

maintained with a DP may be frozen in certain cases.

1. If a written instruction is received from the client by the DP, requesting

freezing of account; or

2. If written instructions are received from the depository pursuant to an

order of the Central or State Government, SEBI, or any orderly the court

or any statutory authority.

A depository account holder (beneficiary account) may freeze

securities lying in the account for as long as the account holder want it. By

freezing the account, account holder can prevent unexpected debits, credits, or

both, creeping into its account. The following types of freeze facility may be
availed of by submitting freeze instruction to the DP in the prescribed form the

table give summarizes the description of status for different types of freeze.

Freeze Type Account Status Additional Details

Freeze for debits only Suspended for Debit -
Freeze for debits as well as Suspended for All -
credits
Freeze a particular ISIN in the Active ISIN status : Freeze
account
Freeze specific number of Active Specific no. of
securities under an ISIN securities are
blocked in the
account

Transmission and Nomination

One of the lesser-known but widely experienced problems of

dealing in securities is with regard to their transmission. The Companies Act

distinguishes transmission of shares from transfer of shares. While transfer of

shares relates to a voluntary act of the shareholder, transmission is brought

about by operation of law. The word "transmission" means devolution of title

to shares, for example. Devolution by death, succession, inheritance,

bankruptcy, marriage etc. the person on whom the shares devolves has to prove

his entitlement by submitting appropriate documents and seek transmission. If

the securities are held in the depository system, documents have to be

submitted to the DP.

Nomination Facility

The Companies (Amendment) Act, 1999 has introduced

provisions for nomination in respect of shares, debentures, fixed deposits, etc.

The nomination facility fulfils one of the long felt needs of the investors. This

facility was already in place for deposits in banking industry. Under the

provisions, a shareholder, a debenture-holder, a bondholder or deposits would

vest, in the event of original investor's death. The facility can be availed of by

any person whether Indian resident or a non-resident Indian investor.

DEMAT & REMAT

Dematerialisation

One of the methods of preventing all the problems that occur with

physical securities is through dematerialisation (demat). India has adopted the

demat route in which the book entry is made electrically against securities that

are cancelled.

After this process each security is identified in the depository

system by ISIN and short name. International Securities Identification

Number (ISIN) is a unique for each security issued in any of the International

Standards organisation (ISO) member countries in accordance with the ISIN

standard (ISO 6166). ISIN is a 12-character long identification mark. It has

three components – a pre –fix, a basic number and a check digit.

DEMATERIALISATION PROCESS
INVESTOR DP

2a 5 2

4
R & T AGENT NSDL
3
Steps :

1. Client/Investor submits the DRF (Demat Request Form) and physical

certificates to DP. DP checks whether the securities are available for

demat. Client defaces the certificate by stamping 'Surrendered for

Dematerialisation'. DP punches two holes on the name of the company

and draws two parallel lines across the face of the certificate.

2. DP enters the demat request in his system to be sent to NSDL. DP

dispatches the physical certificates along with the DRF to the R&T

Agent.

3. NSDL records the details if the electronic request in the system and

forwards the request to the R&T Agent.

4. R&T Agent, on receiving the physical documents and the electronic

request, verifies and checks them. Once the R&T Agent is satisfied,

dematerialisation of the concerned securities is electronically confirmed

to NSDL.

5. NSDL credits the dematerialized securities to the beneficiary account of

the investor and intimates the DP electronically. The DP issues a

 statement of transaction to the client.

FEW IMPORTANT POINTS REGARDING DEMAT AND REMAT

What are the chances of any fraud/disputes in using a demat account?

Whom should I approach in such cases?

Common risk factors applicable to trading in physical shares like

mismatch in signatures, loss in postal transit, etc., are absent since the dematted

shares are traded scripless.

However, in the unlikely event of any other dispute, the

concerned stock exchange and/or Depository Custodian viz. NSDL/CDSL or

SEBI would have to be approached for resolving such issues.

Can the dematted shares be converted back into physical shares?

Yes, definitely. If you wish to get your securities in the physical

form all you have to do is to submit a Rematerialisation Request Form (RRF)

through your DP in the same manner as Dematerialization. Your Depository

Participant will forward your request to the Depository after verifying that you

have the necessary securities in balance. The Depository in turn will intimate

the Registrar and Transfer Agents of the Company who will print and dispatch

to you the share certificates for the number of shares so rematerialized and your

account will be debited by the Depository and credited with the Company.

Will we get back the same certificates after Rematerialisation?

It does not really matter at all. The Registrars and Transfer

Agents will print new certificates with a new range of certificate numbers. You
will be allotted a new folio number; however if you already have an existing

folio number you may be allotted the same.

Rematerialisation:

Rematerialisation is the exact reverse of dematerialisation. It

refers to the process of issuing physical securities in place of the securities held

electronically in book-entry from with a depository. The register prints fresh

candidates to the investor after conforming the request with NSDL and CDSL

and to the extent the accounts balance of the investor with NSDL and CDSL is

reduced. Under this process, the depository a/c of a beneficial owner is debited

for the securities sought to be re-materialised and physical certificates for the

equivalent no. of securities are issued.

REMATERIALISATION PROCESS

INVESTOR DP

2a 5 2

4
R & T AGENT NSDL
3

Steps :

 Beneficial owner requests for Rematerialization.

 Depository participants intimates NSDL of the request through the system.

 NSDL confirm remat request to the registrar.

 Registrar up dates accounts and download details to DP.

 Registrar dispatches certificates to investor.

Trading and Settlement

One of the basic services provided by NSDL is to facilitate

transfer of securities from one account to another at the instruction of the

account holder. Transfer of securities from one account to another may be done

for any of the following purposes:

a. Transfer due to a transaction done on a person-to-person basis is called

"off-market" transaction.

b. Transfer arising out of a transaction done on a stock exchange.

c. Transfer arising out of transmission and account closure.

Off-market Trade

NSDL

DPI DP2

SELLER SELLER

1) Seller gives delivery instructions to his DP to move securities from his

account to the buyer's account.

2) Buyer automatically receives the credit of the securities into his account
 on the basis of standing instruction for credits.

3) Buyers receives credit of securities into his account only if he gives

receipt instructions, if standing instructions have not been given.

4) DP needs to be extra carefull in verifying the signature of the client if

unusual quantities of securities are being debited to the account.

5) Funds move from buyer to seller outside the NSDL system.

SETTLEMENT OF MARKET TRANSACTION

Market Settlement – Demat Shares

NSDL

DP CC DP

BROKER BROKER

SELLER SELLER BUYER BUYER

A market trade is one that is settled through participation of a

Clearing Corporation in the depository environment, the securities move

through account transfer. Once the broker on the stock exchange executes the
trade, the seller gives delivery instructions to his DP to transfer securities to his

broker's account.

The broker has to then complete the pay-in before the deadline

prescribed by the stock exchange. The broker removes securities from his

account to CC/CH of the stock exchange concerned, before the deadline gives

by the stock exchange.

The CC/CH gives pay-out securities are transferred to the buying

broker's account. The broker then gives delivery instructions to his DP to

transfer securities to the buyer's account. The movement of funds takes place

outside the NSDL system.

1. Seller gives delivery instructions to his DP to move securities from his

account to his broker's account.

2. Securities are transferred from broker's account to CC on the basis of a

delivery out instruction.

3. On pay-out, securities are moved from CC to buying broker's account.

4. Buying broker gives instructions and securities move to the buyer's

account.

PAY-IN:

The process of a broker (CM) submitting securities being towards

the securities sold by him on behalf of his client, to CC/CH of a stock exchange

is called 'pay in'. All CMs are expected to complete the pay in before the

deadline time prescribed by the stock exchange in a depository environment.

PAY-OUT:
 The process of a CC/CH transferring the securities to the broker's

settlement-account for the quantity of securities purchased by them on behalf

of their clients is known as pay-out.

SPECIAL SERVICES

 Pledge & Hypothecation:

The Depositories Act permits the creation of pledge and

hypothecation against securities. For this purpose, both the parties to the

agreement, i.e. the pledge and the pledgee must have a beneficiary account

with NSDL. However, both parties need not have their depository account

with the same DP. The nature of on the securities offered as collasteral

determines whether the transaction is a pledge or hypothecation. If the lender

(pledgee) has unilateral right (without reference to borrower) to appropriate the

securities to his account if the borrower (pledgor) defaults or otherwise, the

transaction is called a pledge.

If the lender needs concurrence of the borrower (pledgor) for

appropriating securities to his account, the transaction is called hupothecation.

NSDL
2

3 5

Pledgee's DP Pledger's
PLEDGE OF DEMAT SHARES DP

4 2
Confirmation Request
Pledgee Pledgers
Agreement

LOAN
 6
Steps :

1. Agreement is signed between the pledgor and pledgee outside the NSDL

system.

2. Pledgor gives a pledge creation request to DP who enters it in the

system.

3. The request reaches the pledgee's DP through the NSDL system. His DP

in imates pledgee.

4. Pledgee gives a pledge creation confirmation to his DP who enters it in

the system.

5. Securities are transferred from 'free balances' head to pledged balances

NSDL
head. 2

6. 2 by pledgee
Loan is given 3 4 the NSDL system.
to pledgor outside
PLEDGEE'S
PLEDGE CLOSURE PLEDGER'S
DP DP
The pledgor can request for closure of pledge/hypothecation after
2 3 2
Confirmation Closure Request
the performance of the underlying agreement.
PLEDGEE PLEDGERS

PAYMENT

1
Steps:

1. Pledgor repays the loan to pledgee.

2. Pledgor gives a pledge closure request to his DP. DP forward the

request to pledgee's DP through NSDL.

3. Pledgee gives a pledge closure confirmation from to DP. DP confirms

the closure on the system.

4. The pledge is closed and the securities are moved from 'pledged'

balances to free balance in the pledgor's account.

STOCK LENDING AND BORROWING

The transactions involving lending and borrowing of securities

are executed through approved intermediaries duly registered with SEBI under

the Securities Lending Scheme, 1997. Such an intermediary may deal in the

depository system only through a special account (known as deal in the

Intermediary Account) opened with a DP. An intermediary account may be

opened with the DP only after the intermediary has obtained SEBI approval

and registered itself with SEBI under the Securities Lending Scheme. The

intermediary also needs to obtain an approval of NSDL.

CORPORATE ACTIONS

Benefits acquiring to shareholders in the nature of dividends and

bonus, etc. are generally referred to as corporate actions in the context of

depository operations. Corporate actions are the events, which affects the

rights, obligations and/or interests of the beneficial owners of the securities

held in a depository. The most common examples are payment of interest,

dividend, bonus shares, rights, splits, merger, redemption, calling of call-money

due, liquidation etc.

PUBLIC

Primary market is a market for raising funds from the primary

sources of savings i.e. investors. The issue of securities in the primary market

can be made by a new company, a new company promoted by an existing

company, an existing public listed company, or an existing public unlisted

company. According to the Companies Act (section 68B) every listed public

company making an initial offer of any security of Rs. 10 crore and above has

to issue it only in dematerialized form in accordance with Depositories Act,

1996.

DEBT INSTRUMENTS & GOVERNMENT SECURITIES

Debt Instruments
 The interest bearing securities are called debt instruments.

Depending on features like issuer, teanure, interest rate, etc., debt instruments

can be classified into different categories like bonds, debentures, commercial

paper, government securities, etc. These are further classified broadly into

subordinate bonds, floating rate bond/debenture, deep discount bond,

secured/unsecured debentures, zero coupon bonds, debentures and commercial

paper, government securities are issued by governments State or Central.

GOVERNMENT SECURITIES

Government security means a security created and issued by the

Central Government or State Government for the purpose of raising a public

loan. There are two types two types of Government Securities – Dated

Securities and Treasury Bills. Dated securities have a maturity period of more

than one year and the maturity period of treasury bills is up to one year. RBI

through its Public Debt Office (PDO) handles all the activities relating to issue

of government securities, settlement of trade.

SPEED-e

NSDL has set-up Internet based service called SPEED-e. Demat

account holders (including brokers) can submit delivery instructions to their

Depository Participants (DPs) electronically, thus eliminating the need to

submit instructions in paper form. The facility features high level of security

for server authentication and data encryption. The instructions submitted by

the account holders are digitally signed. SPEED-e allows both interactive and

batch file operation with digital signature. Thus, data entered by the account
holder is received in to the depository participants system and executed.

Freeze Facility on Speed-e

The clients can freeze/un-freeze their accounts through Speed-e

website. The freeze/unfreeze instructions given through Speed-e will be

directly applied on the depository system and the DP cannot override such

freeze/un-freeze instructions.
 BANKING SYSTEM

We are beginning the study of commercial banking by looking its

meaning. This "safe place" ultimately evolved into financial institutions that

'accept deposits and make loans' i.e. the modern commercial banks. Banks

accept money for the safe custody, which is repayable on order of the depositor.
 MEANING

Banking means the accepting for the purposes of lending or

investment of deposit of money from the public, repayable on demand or

otherwise & withdraw able by cheque, draft or otherwise.

In short we can say.

1. A bank is a commercial establishment a dealer in debts which

2. Aims at earning profits.

3. By accepting deposit from the public, which

4. Are payable on demand or otherwise, through

5. Cheque, drafts or otherwise; and

6. Which are used for lending or investment.

Accepting Lending Loans Credit Creation Cheque System of

Deposits & Advances Payment of funds

FUNCTIONS
Current A/c
OF MODERN BANKS
Fixed or Time
Deposit A/c
Saving Bank Recurring
Deposit A/c Deposit A/c

Money at Call Cash Credit Credit to govt.

Overdraft

Teams Loans
 Banks performs different functions & services so that they can be

described as departmental stores of financial services.

1. Accepting Deposits

The major function of modern bank is acceptance of deposit from

the public. Banks accepts deposit by mobilizing the saving of public. To

mobilize the savings and to hold deposits, banks pay interest on the deposits.

To attract the depositor's banks maintains different types of accounts like:

FIXED OR TIME DEPOSIT ACCOUNT: Fixed deposit account is one

where in money is deposited for a fixed period and is not supposed to be

withdrawn before the expiry of the said period. This period usually varies from

15 days to 5 years. The rate of interest allowed on such accounts generally

increases with the period of deposits. This account is also known as term
deposits account. But if a customer does need money before the expiry of the

fixed period, he can either take a loan against the fixed deposit or the bank may

allow him to withdraw a deposit before the expiry of the due date.

SAVING BANK DEPOSIT ACCOUNT: This is an account in which the

customer deposits small savings in the bank. This account is meant for the

benefit of middle class and low-income group people. Any person with

minimum specified deposits could open a saving bank deposit account.

Deposits can be made in this account for any number of times in a week. At

present 50 withdrawals are permitted in a half-year by most of the banks.

Interest is allowed on a minimum balance standing to the credit of an account

during the period from the 10th day of the month to the last day of every month.

CURRENT ACCOUNT: Current Account, some times also called as "Open

account", is one in which money can be deposited and withdrawn at any time

during working hours without giving any notice to the bank. This account can

be defined as running account between a banker and a customer. Current

accounts suit the requirement of a businessmen, companies, corporations,

institutions, firms etc.

RECURRING DEPOSIT ACCOUNT: In this account, a predetermined

amount is deposited into account every month. the rate of interest is normally

equal to the rate of interest payable on a term deposits account of a same period

i.e. the tenure of a recurring deposit. In a case of need, premature withdrawal

is allowed. Private sector banks are using latest technology in banking and are

presenting certain innovative accounts under different names. These are:

  FLEXIBLE ACCOUNT: These accounts combine the features and

benefits of saving account & fixed deposit accounts.

 ATM (Automatic Teller Machines): The banks, which have

computerized high tech branches, are providing round the clock banking

facilities through ATM. The facilities through ATM can differ

depending upon the software being used.

2. Lending or Advancing Loans

Lending loans and advances is another function of a modern

bank. A bank must lend deposits or make advances to the public directly or

indirectly, Lending must be on the basis of funds raised through acceptance of

deposits from the public. The usual methods adopted by banks to make

advances are:

a) Money of call: It is the money lent for a very short period, generally

varying from 1 to 14 days. Such advances are usually made to other banks and

financial institutions only.

b) Overdraft: An overdraft is an advance given by allowing a customer to

overdraw his current account upto an agreed amount. An overdraft account is

operated in the same way as current account. In overdraft the interest a charged

only on the credit actually utilized, i.e. to the extent account is overdrawn.

c) Cash Credit: Advancing credit as cash credit is also very popular.

Under this system, the bank advances loans to the customer on the basis of his

current assets, receivables or fixed assets by hypothecating them in favour of

the banker.
d) Discounting of bills: This is another very popular method of advancing

credit. In a bill of exchange, the debtor accepts a bill drawn upon him by the

creditor and thus agrees to pay the amount mentioned on maturity. In

discounting the bank takes the bill and after making deductions for the margin

makes the payment to the holder.

e) Term loans: This is lump sum loan advanced with a fixed maturity

period of more than one year. Term loans are usually secured and provide

medium to long-term funds to the borrowers. Repayment is made either on

maturity or in installments.

f) Credit to Government: Banks provide indirect credit to the central or

state governments by investing in their securities. Investment in securities

makes an important part of the portfolio of a bank. It enables it to meet

requirement of statutory liquidity ratio (SLR).

3. Credit Creation

Credit creation is another distinct function performed by banks. This function

is automatically performed while advancing credit or loans or by accepting

deposits. Banks are able to create credit because the demand deposits i.e. a

claim against the bank is accepted by the public in settlement of their debts.

Thus, when a bank advances a loan or credit, it does not lend ash but opens an

account in favour of the customer and credits the amount to the account. It

creates a claim against itself, which is acceptable by the public for settlement of

debts. As the public for settling their debts accepts these claims against the

banks, it is an important constituent of money supply. In this process bank

creates money.

Banks need not keep the entire deposits in cash. Only a part of

the deposits is required to be dept in cash because the bank in practice is never

required to repay all the deposits in cash. This enables the bank to create

money many times more than the deposits with it.

4. Cheque System of Payment of Funds

The cheque system was evolved in very early stages of banking & now it has

become the credit instrument in the banking world. Banks perform the

functions of payment of funds. Because of clearing houses & clearing

operation of banks, cheques can be & are used for transferring funds from one

center to another. In modern days they can also be used for transferring funds

from one country to another.

OPERATIONAL MODEL OF A BANK

HEAD OFFICE

BRANCHES BRANCHES

CLIENTS CLIENTS CLIENTS CLIENTS

BANKS NORMALLY PERFORM FOLLOWING OPERATIONS:

1) ACCOUNT OPENING

There are various types of accounts such as:

 Fixed deposit account

 Saving deposit account

 Current deposit account

 Recurring deposit account

ACCOUNTS

Fixed deposit Saving deposit Current Account Recurring Deposit

Steps for Opening and Operations of a Bank Account:

A. The first step to open an account if that a client has to give an

application in a prescribed form giving particulars such as name of the

applicant, occupation, full address, specimen signature & bank may also

call for references from the applicant.

B. If a company wants to open a current account with bank the following

documents will have to be submitted:

  A certified copy of the resolution of the Board of Directors for opening

of the account.

 A copy of Memorandum and Articles of Association of the Company.

 Specimen signature of the person authorized to operate the account.

C. The next step is that the applicant deposits the initial amount and the

banker opens the account in the name of an applicant. Generally, the

minimum amount to be deposited initially varies from bank to bank,

when the banker opens the account in the name of applicant, it provides

him with:

 Pass book

 Cheque book, and

 Pay-in-slip book

2) TRANSFER BETWEEN INTRA BRANCH ACCOUNTS

BRANCH BRANCH

TRANSFER OF MONEY

STEPS :

I. If any person wants to transfer the funds, then he/she has to give written

instructions to bank.

II. The bank will debit the applicant's account credit beneficiary's account.

In case bank has centralized banking system, then transfer is made through on-

line transfer of funds, else the debiting branch of the bank sends a postal advise

to the branch having beneficiary's account.

3) INTER-BANK TRANSFERS

BANK MAINTAINING CLEARING

APPLICANTS HOUSE
Payment
Confirmation

BANK MAINTAINING Cheque

BENEFICIARIES

Credit Advice

STEPS :

I. A person who wants to transfer money issues cheque in favour of

beneficiary in favour of beneficiary.

II. Beneficiary deposits.

III. The collecting bank will send cheque to the clearing house and after the

settlement through clearing house cheque in his/her bank credits

beneficiary account.

4) TRANSMISSION AND NOMINATION

TRANSMISSION: The act distinguishes transfer from transmission, while

transfer is a voluntary act; transmission is brought by operation of law.

Transmission means the devolution of the titles of property in moveable assets

that is devolved by death, succession, inheritance, bankruptcy and marriage etc.

NOMINATION: under this provision, an account holder nominates a person in

whom the funds would vest in the event of death of the original account holder.

The facility can be availed by any person whether Indian resident or NRI.

5) DEPOSITS AND WITHDRAWAL

PAY IN SLIP

CASH DEPOSITS

INVESTOR'S
CURRENCY WITH ACCOUNT WITH
ACCOUNT HOLDER BANK

PAYOUT SLIP

CASH WITHDRAW

(CHEQUE)

STEPS:

I. A person has to fill a pay-in slip of required amount, which is to be

deposited.

II. Then after depositing the cash to the cashier the data is feeded in to the

client's account, which is electronically maintained in computer-based

systems.

III. In the case of withdrawal of money, a person has to fill up a withdrawal

slip or a cheque.

IV. Banks debits the clients account while encashing his cheque or
 withdrawal slip.

V. Required amount is taken from the cashier.

6) PLEDGE AND HYPOTHECATION:

Nature of control on the securities offered as collateral

determines whether the transaction is a pledge or hypothecation. If the lender

that is the pledgor has a unilateral right to appropriate to his account in case the

borrower defaults, the transaction is called as a pledge. If a lender meeds

concurrence of the borrower for appropriating securities to his account, the

transaction is called hypothecation.

STEPS:

I. To start with, he pledgesas to fill up a request form to get lien-marked

his/her property in favour of specified pledgee.

II. The bank then marks the lien in favour of the pledgee at the request of

pledge.
 ANALYSIS

After compiling and interpreting information gathered and after

meeting some key persons working in both of the systems. My analysis is that

although the objective for being in business & logic behind doing various

functions of Banks and Depositories are totally different yet their operational

models have many similarities, some of which are following:

ACCOUNT OPENING

I. In both of the systems to avail the services a customer has to open an

 account.

II. In both of the systems there are different types of accounts such as fixed,

saving, current accounts in banks and individual, HUF and corporate

accounts in Depositories. An investor client can choose any of the

account as per his/her needs.

III. In both of the systems, in order to open an account, the client has to fill

up an application form which includes different information about the

client such as name, address, identity (photograph), specimen signatures,

nominees, references etc.

IV. Depository account in banks and individual system is somewhat parallel

to current account maintenance system of bank. It can be seen from the

following factors.

 CLEARING HOUSE

In depository system there is a clearing house/clearing

corporation, which works similarly as clearinghouse of banks works. Each

clearing member of stock exchange is connected to NSDL/CDSL is required to

open one clearing account with depository participants of his choice and if a

clearing member is member of more than one stock exchange, then one

clearing account per stock exchange is required to be opened and in the same

manner each bank is required to open an account with clearing house of that

particular area. In both of the systems netted him of funds or securities is

debited or credited to the accounts of banks and clearing member accounts.

 ANCILLARY FUNCTIONS
 Banks can perform many ancillary functions like locker facility,

life and general insurance facility. Banks also provide various types of loans.

On the other hand the depositories will not perform all such ancillary functions.

Banks also provide ATM facility which is not possible by the depositories. In

nutshell it can be said that following are the main dissimilarities between bansk

and depositories.

TRANSFER OF SCRIPS/MONEY

In both depository and banking system written instructions are

necessary for debiting account. In depository system one can transfer the

scrips directly from one account to another without physical handling or

movement of scrips. In the same manner banks can transfer funds from one

account to without physical handling of cash.

TRANSMISSION

In depository system the scrips can be transferred to the nominee

after death of the account holder. Similarly, in banking system funds can be

transferred to the nominee after the death of the account holder.

NOMINATION

In both of the systems aclient can nominate any person of his/her

choice as a nominee. It means that nominee is a legal owner of the funds in he

banks or scrips in the depository after death.

DEMAT AND REMAT/PAY IN AND PAY OUT

In depository system, physical scrips can be transferred from

physical of electronic form through the process of Dematerialisation and vice-

versa from electronic form to the physical scrips through the process of

Rematerialisation.

In the same manner, in the banking system cash is transformed

into electronic form through pay in and from electronic to cash form through

withdrawal process.

PLEDGE AND HYPOTHECATION

In both depository and banking system, transferring the securities

from "FREE BALANCE" head to "PLEDGED BALANCES" does pledge

reaction in favour of third party.

After analyzing the similarities between the operations and

maintenance of DP account of depository with operation and maintenance of

current account of a bank we can infer that operational model of Depository in

India has been taken from the operational model of banking system. Although

there are still some dissimilarities in between these two models, some of which

are given as below : -

a) In account opening the signature and photograph of nominee is not

necessary in banks while it is mandatory in depository.

b) No minimum balance is required while opening an account in depository

system, while banks do require an initial deposit to open an account.

TRANSMISSION AND NOMINATION

Nomination : Nominee is aware of his/her nomination in depository system

while in banking system nomination can be kept confidential by the account

holder.
DEMAT AND REMAT

Banks do have pay-in-slips and withdrawal forms.

TRANSFER OF SCRIPS/MONEY

In the banking system the transfer of money is done through

online and real time but in depository system there id only online transfer of

scrips because credit to beneficiary's account is given on receipt of

confirmation from the beneficiary.

PLEDGE AND HYPOTHECATION

Bank can create a pledge in favour of itself but in case of

depository it cannot create pledge in its own favour.

For the purpose of my study that is making a comparative

analysis in between the operational model of banks and operational model of

DPs, the data regarding banks that have entered into DP services are:

DEPOSITORY BANKS
1. In depository system a share transfer In bank a chequebook is given to
book is given to Client. client.
2. No minimum balance is required. Minimum balance is required.
3. No restriction in operating in transfer No restriction in operating in current
of scrips. account.
4. Allocates client ID number Allocates account number.
5. Hold securities in A/c Hold funds in A/c
6. Safeguarding of securities Safeguarding of money
7. Different types of services are Different types of services are
provided by depository such as provided by bank such as pledge,
pledge, transfer of scrips etc. transfer of money etc.
8. All joint holders has to signature the Either holder can signature the
instruction slip. instruction slip.
9. Interest only through stock lending Entitled for the interest
10. Signature and photograph of the Nomination is kept confidential in
nominee is required banks.
11. Safeguarding of securities Safeguarding of money
12. Not provide ancillary functions Banks provide ancillary functions

ICICI BANKS

ICICI bank is a private bank providing DP services. They have

ICICI direct.com, which is providing online share trading services. This bank

commenced its operations in 1997. They are connected with NSDL only and

they have 750 – account holders in Ludhiana, of which 700 accounts are active

and remaining 50 are passive. Their DP is online.

CENTURION BANKS

Centurion Bank was promoted by 20th century Finance

Corporation limited. Previously in association with Keppel tatlee bank of

Singapore, it has an equity participation from international finance corporation

– Washington & Asia development bank – manila. It has introduced depository

services for its investors, all its branches are linked through V – SAT and offers

any where banking to its customer. But now the centurion is merged with bank

of Punjab and become centurion bank of Punjab in October, 2005. But this

bank is banned to open DMAT accounts after the IPO scam, but this may be

temporarily.

After visiting this bank, and after collecting the required

information from ms. simu I conclude the following points:

 ACCOUNT OPENING LSESL provide the function of opening the

DMAT account to its customers but the Centurion Bank of Punjab is banned

to perform this function after the IPO scam.

 DEMAT/RAMT: Both LSESL and CBOP will perform the function of

 DEMAT/REMAT.

 TRADES AND SETTLEMENT: The depositories provide the function of

trade and settlement, but CBOP provide the function of transfer of

securities.

The Centurion Bank of Punjab also provide the many ancillary

functions such as locker facility, FOREX (foreign exchange), fixed deposits,

loans, ATM facility, insurance facility in life and general insurance.

The centurion bank of Punjab has near about 2000 DEMAT

accounts with them. Their account opening charges are nill, but their annual

maintenance charges are Rs. 500 p.a. They take more than a week near about

10 days to open an account. They charge Rs. 25 per certificate for converting

shares from physical to DEMAT and also Rs. 25 for DEMAT to physical, and

rate list is also attached in annexure.

HDFC BANK

HDFC Bank is also providing DP services. This bank

commenced its operations in 2001. They have connectivity with NSDL only.

They have the client base approx. 3500 out of which 2000 are active and

remaining 1500 are passive their DP is online.

BANK OF PUNJAB

Bank of Punjab is the North India's premier bank providing retail

services to its customer. Their bank is also providing DP services to its clients.

The main edge point of this bank is that in Ludhiana they have six branches

and the person can avail DI' services from any of its branch. They have
commenced their DP operation in 2000 in Ludhiana. Their DP is providing

online services to its customer. They have connectivity with NSDL only. They

have it client base of 4600.

The unique selling propositions of this bank are

 Lowest charges
 Same day execution of trade
 Buy/sell facility
 Banking DP-secure and safest

IDBI BANK
IDBI is another private bank providing DP services. They

commenced its DP operations in Ludhiana in 2002. They are connected with

both NSDL and CDSL. They are having a client base of only 400 out of which

350 are active and 50 are passive. Their DP is online.

They have their unique selling proposition as

 Efficient service
 Personalized DP book
 Quick confirmation of trade
STATE BANK OF INDIA

This public sector bank is also providing DP services among

various private sector banks. SBI commenced its operation at Ludhiana in

2000. Their DP is connected with CDSL only. Their DP is online. They have

only 450 customer in Ludhiana and all are active.

They have their unique selling proposition as

 Doing on online
 Low charges
 Better services

PUNJAB NATIONAL BANK

The Punjab National Bank is a govt. sector bank, which also deal

in the depositories function. After visiting this bank I come to know that this

bank has charged Rs. 335 p.a. for maintaining the DEMAT account and Punjab

National Bank have near about 1000 DEMAT accounts with them. The Punjab

National Bank working with NSDL from 1993-1994 and not work with CDSL.

The Punjab National Bank also provide the function of opening the DEMAT

account. The Punjab National Bank deals in non life insurance only. They

charged Rs. 25 for physical to DEMAT of shares and also Rs. 25 for DEMAT

to REMAT. This bank also provide many ancillary functions like other banks

but not deal in life insurance.

BANK OF India

Bank of India is also a nationalized bank. This bank of India also

deals in the depositories functions. I have visited the bank of India and meet

Mr. Surinder Kumar Maheshwari and collect the required information. The

bank of India perform the functions like account opening, DEMAT/REMST,

transfer of securities, pledge and hypothecation and nomination and

transmission.

The Bank of India have more than 1500 DEMAT accounts. They

take only one day to open a DEMAT account. They charge Rs. 200 p.a. for

annual maintenance charges. The Bank of India charges Rs. 20 for physical to

DEMAT of share for per certificate and also Rs. 20 per certificate for REMAT
to DEMAT.

Following are the things which must be required while opening a

DEMAT account:

PROOF OF INDENTITY PROOF OF ADDRESS

 Pan card with photograph Ration card
 Passport Passport
 Voter ID Voter ID
 Driving License Driving License
 I-card from employer Bank statement
 RESEARCH METHODOLOGY

OBJECTIVES OF THE RESEARCH

1. To compare the Operational model of Depositary with the Operational

model of Bank

2. To know what Depositary System has taken from Banking System

(similarities and dissimilarities).

3. To study the investors perceptions regarding Depositary Participant.

RESEARCH METHODOLOGY

The present study was undertaken to perform a comparative

analysis of operational model of Depository with the operational model of bank

and investors perception regarding Depository. This chapter gives the research

design, data collection methods, sampling techniques, field work carried out,

analysis & interpretation limitations inherent in the project and finally coverage

(scope of the research work).

RESEARCH DESIGN

The research design is a pattern or an outline of a research

project's working, it is statement of only the essential elements of a study, those

that provide the basic guidelines for the details of the project. The present

study being conducted followed a descriptive research design. It produces

picture of the phenomenon in which the decision maker is interested. As the

data would be responses from a sample containing a large number of sources, it

is a "cross section" of the situation. Design of descriptive studies include the

nature and source of the data, the nature of the expected results and the

analytical method.

DATA COLLECTION METHOD

Both primary and secondary source of data has been used to

collect information. The secondary data means data that are already available.

It is collected through published data. Published data are available in books,

magazines, reports and publication of various associations connected with

bank, stock exchange and various sites of Internet. The primary data was

collected by personally interviewing the bank manager and various investors.

Personal interview method was adopted, taking into consideration the

availability of time and other resources, whenever need arouse various

supplementary question were also asked to gain maximum information from

the respondents. Questionnaire was prepared to study the investors perception

regarding depositary. A survey was conducted keeping in view the objective of

the study. The questionnaire contained both open-ended and close ended

questions.

SAMPLING PLAN

Sampling is an effective step in collection of primary data and

has a great influence on the quality of results. The sampling plan includes the

populations, sample size and sampling design.

POPULATION

The study aimed to include the investors of Ludhiana Stock

Exchange in Ludhiana. As the study was on investors perception regarding

depository so LSE securities was selected for the study.

SAMPLE SIZE

The sample size for the research was 90 investors.

SAMPLING DESIGN

The selection of the investors was done on the basis of

convenience sampling as the universe has the coverage area of the study was to

large. Under this sampling technique samples which were easily accessible

chosen.
DATA ANALYSIS AND INTERPRETATION

For the purpose of analyzing, raw data was summarized into a

master table and from this table the results have been carried out. The

questions, which has alternatives choices, were analyzed by taking percentages.

In case of questions on likert and itemized rating scale, the mean scores and

percentages were calculated. The questions to which there were specific

answers. The ranges were clubbed and percentages were calculates. In case of

exploratory questions, the general suggestions were summarized.

IMPORTANCE OF STUDY

The study is very significant in the sense that it examines what

the depository system has been taken from the baking system by comparing the

similarity and dissimilarities between then and also satisfaction level of

investors having depository account in LSE Securities Ltd.

LIMITATION OF THE STUDY

 The main limitation of the study is the availability of the time. As sufficient

time was not available for collection of information from investors in each

Depository Participant so only LSE Securities Limited has been taken

place.

 The technique for the selection of sample on which entire study is based, its

convenience sampling hence limitation on account of error prevalent in

proposed sampling technique cannot ruled out.

 Some respondents were not interested in giving answer and they appeared
 to be busy or bored at the very sound question.

 Since this is an opinion survey, personal bias may have crept in due to the

respondent tendency to rationalize their views.

RESULT AND DISCUSSION

After compiling and interpreting information gathered after

meeting some key persons working in both of systems. My analysis is that

although the objective for being in business and logic behind doing various

functions of Banks and Depositories are totally different yet their operational

models have many similarities, some of which are following.

SIMILARITIES:

1. In both of the systems to avail the services a customer has to open an

account.

2. In both the systems there are different type of accounts such as fixed,

saving, current accounts in banks and individual, HUF and corporate

accounts in Depositories. An investor clients can choose any of the

accounts as per his/her needs.

3. In both of the systems, in order to open an account, the client to fill up

an application form which includes different information about the client

such as name, address, identity (photograph), specimen signatures,

nominees, references etc.

4. Depository account in banks and individuals system is some what

parallel to current account maintenance system of bank. It can be

 deducted from the following factors i.e. DISSIMILARITIES.

DEPOSITORY BANKS
1. In depository system a share transfer In bank a cheque book is given to
book is given to Client. client.
2. No minimum balance is required. Minimum balance is required.
3. No restriction in operating in transfer No restriction in operating in current
of scrips. account.
4. Different types of services are Different types of services are
provided by depository such as provided by bank such as pledge,
pledge, transfer of scraps etc. transfer of money etc.
5. Safeguarding of securities Safeguarding of money

CUSTOMER PERCEPTION REGARDING DEPOSITORY

4.2.1 Opinion from the Investors

As discussed in chapter on research methodology, 90 investors

were covered in Ludhiana who are availing depository services from the

respective DPs. The opinion of the investors are as under:

4.2.2. Opinion regarding the duration since which the respondents have

been operating in capital market.

DURATION NO. OF RESPONDENTS

Less than one year 12 (13)
More than 1 year 17 (19)
More than 2 year 20 (22)
More than 3 year 41 (46)

TOTAL 90 (100)

Table No. 1
 Figure No. 4.1

45
40
35
30
25 No. of respondents
20
15
10
5
0
Less than More than More than More than
one year 1 year 2 year 3 year
Duration

It is evident from the above table that majority (56%) of the

respondents are operating in capital market for more than three years, followed

by 22% operating in capital market for more than 2 nd year and 19% for more

than one year. 13% for less than 1 year. These 87% respondents are operating

in capital market for more than 1 year.

4.2.3. Opinion regarding the purpose of transacting on stock exchange.

OPINION NO. OF RESPONDENTS

Making short-term gain 29 (32)
Making long-term gain 15 (17)
Regular income 28 (31)
All 18 (20)

TOTAL 90 (100)

Table No. – 2

Table – 2 reveals that majority 32% of the respondents

transacting on the stock exchange for the purpose of making short-term gains,

followed by 31% transacting for the purpose of getting regular income from
stock exchange, followed by 17% of the respondents transacting for the

purpose of making long-term gains and followed by 20% of the respondents

transecting on the stock exchange for the purpose of all.

Figure No. 4.2

35
30
No. of respondents

25
20
15
10
5
0
Making short- Making long- Regular All
term gain term gain income
Opinion

4.2.5. Opinion regarding Money spend initially to open on DP account.

MONEY NO. OF RESPONDENTS

Between Rs. 100 to Rs. 200 15 (17)
Between Rs. 200 to Rs. 300 40 (44)
More than 300 35 (39)
TOTAL 90 (100)

Table – 3

Table – 3 reveals that 44% of the respondent have spend their

money between Rs. 200 to Rs. 300 initially to open a Demat account, followed

by 39% of the respondent have spend more than Rs. 300 initially to open

Demat account and was about 15% of the respondent spend money between

Rs. 100 to Rs. 200 initially to open a Demat account.

 Figure No.4.3

Between Rs.100
to Rs.200
Between Rs.200
to Rs.300
More than 300

4.2.4. Opinion regarding the name of DP with whom they DP account.

NAME OF DP NO. OF RESPONDENTS

LSE Securities 44 (48)
Bank DP 22 (24)
Other 24 (28)
TOTAL 90 (100)

Table – 4

Table – 4 reveals that 48% of the respondents have their DP

account in LSE securities, followed 24% of the respondent have their DP

account in bank and 28% of the respondents have their DP account in other

DP's include master trust, Stock Holding Corporation India Ltd., Karvy, India

Bulls etc.
 Figure No. 4.4

24%
LSE Securities
44%
Bank DP
Other
22%

2.2.6. Opinion regarding Days spend initially to open on DP Account.

DAYS SPEND NO. OF RESPONDENTS

One day 15 (16)
Two days 43 (48)
Three days or more 32 (36)
TOTAL 90 (100)

Table – 5

Table – 5 reveals that 48% of the respondent have spend two days

initially to open Demat account, followed by 36% of the respondent have spend

three days or more initially to open a Demat account, followed by 16% of the

respondents have spend one day initially to open a Demat Account.

Thus 84% of the respondents have spend initially more than one

day to open a Demat Account.

 Figure No. 4.4

44% One day

24%
Two days

22% Three days or

more

2.2.7. Opinion regarding amount charged by DP.

OPINION NO. OF RESPONDENTS

Excessive 58 (64)
Insufficient 0 (0)
Adequate 32 (36)

TOTAL 90 (100)

Table – 6

Table – 6 reveals that 64% of the respondents view that the

amount the amount charged by the DP is excessive, i.e. excess than the required

and followed by 36% of the respondents view that the amount charged by the

DP is adequate means that the DPs will charge reasonable amount from its

customers.
 Figure 4.6

36% Excessive
Insufficient
64% Adequate
0%

2.2.8. Opinion regarding decision of Opening a Demat account has been

influenced by amount charged by various DPs.

Yes 58 (64)
No 32 (36)
TOTAL 90 (100)

Table – 7

The evident from the above table that 64% of the respondents

decisions of opening a DEMAT account have been influenced by among

charged by various DP's means because of too expensive some persons hesitate

to open a DEMAT account and about 36% of the respondent decision have not

been influenced by the amount charged by various DPs means if they want to

open DEMAT a/c then its cost doesn't matter.

 Figure 4.7

36%
Yes
No
64%

2.2.9. Opinion regarding time taken by the DP to credit the security in

electronic form to account.

OPINION NO. OF RESPONDENTS

One week 28 (31)
2-3 weeks 36 (40)
Above 3 week 26 (29)
TOTAL 90 (100)

Table – 8

Table – 8 The opinion of the respondents regarding time taken for

Demat of shares is cleared from table – 8 as majority 40% of the respondent are

of the view that 2 – 3 weeks time is taken for demat of shares; and 31% of the

respondents says that DPS will DEMAT their shares with in a week and only

29% of the respondents are saying that time taken is more than 3 weeks to

demat the shares.

 Figure 4.8

40
35
30
25
20
15 No. of
10 respondents
5
0
One 2-3 Above 3
week weeks week
Time taken

2.2.10. Details regarding DEMAT system is beneficial for investors

or not.

Yes 54 (60)
No 36 (40)
TOTAL 90 (100)

Table – 9

From the above table it is viewed that 60% of the respondent

think that Demat system is beneficial for them and 40% of the respondents

think that it is not beneficial for them.

System is beneficial for them is that the quick services provided

by their DP and also they thing that there is immediate transfer of shares and

also minimum risk of transfer and delivery is included and there is less chances
of misappropriation of securities by the stock brokers so DEMAT is beneficial

for investors.

Out of 40% of the respondents, 20% think that it is not beneficial

for them as more time taken by the DP and 20% of the respondent though that

it is not beneficiary because more amount charged by their DP so it is wastage

of money and time.

Figure 4.9

40%
Yes
No
60%

2.2.11.Opinion regarding satisfactory about service provided by their

Depositories.

OPINION NO. OF RESPONDENTS

Highly satisfied 26 (29)
Satisfied 34 (38)
Indifferent 25 (28)
Dissatisfied 05 (5)
Highly Dissatisfied 0 (0)
TOTAL 90 (100)
Table – 10

From above table it is viewed that about 38% of the respondent

are satisfied by the DP, followed by 26% of the respondent are high satisfied by
their DP, followed by 28% of the respondents are indifferent about their DP and

5% of the respondent are dissatisfied by their depositories services.

Figure No. 4.10

40
No. of respondents

35
30
25
20
15
10
5
0
d d t d
fie fie re
n ed ie
tis tis fi fe tis
fi ti sf
sa Sa d a a
y In ss i ss
g hl Di yD
Hi gh
l
Hi
Level of satisfaction

CONCLUSION

The study has prompted me to think that if the depositories in

India had not adopted the operational model of bank then what could have been
the alternate model. Could it be railway or airline reservation or an inventory

accounting & maintaining system or result compilation system or something

new and innovative? The study also indicates that "Operational Model of

Depository is derived from the Operational Model of Banking System". More

efforts should be done for improvement in the operational made of the

depository system.

BIBLIOGRAPHY

MAGAZINES
Hand Book for NSDL Depository Operations Module:

VOLUME : 1

VOLUME : 2

VOLUME : 3

VOLUME : 4

NEST UPDATE MAY 2006

LUDHIANA STOCK EXCHANGE – ANNUAL REPORT 2005 – 2006

BOOKS

BANKING AND FOREIGN TRADE (By) R.K. Sharma

Shashi K. Gupta
Jagwant Singh

Investment Management (By) V.K. Bhalla

Research Methodology (By) Boyd.

WEBSITES

WWW.NSDLINDIA.COM

WWW.BANKERSINDIA.COM

WWW.NSEINDIA.COM

WWW.CDSLINDIA.COM

QUESTIONNAIRE

I am a student of B.B.A. (Professional). For the shake of my summer

training. I am doing the research work on the project 'Depository’.
Do you invest in capital market? (Yes\No)

If, Yes, for how long, you are transacting on stock exchange?

(a) Less than one year (b) More than one year
(c) More then two year (d) More then three year

What is the purpose of your transaction on stock exchange?

(a) Marking short terms gains (b) Making long term gains
(c) Regular income (d) All

Do you have any DEMAT account? (Yes\No) if No, do you want to

open?____

If yes, Name the DP with whom you have your DP account?

(a) LSE securities (b) Bank DP (c) Any other

How much money you have to spend initially to open your DEMAT
account?

(a) Between Rs. 100-Rs. 200 (b) Between Rs. 200-Rs. 300

(c) Above Rs. 300

How many days you have to spend initially to open your DEMAT
accounts?
(a) 1 day (b) 2 days (c) 3 days

What are your views about the amount charged by your DP?

(a) Excessive (b) Insufficient (c) adequate

Had your decision regarding opening a DEMAT account was

influenced by
amount charged by various DP's? (Yes/No)

On an average, how much time in your DP takes to credit the

security in electronic form to your account?

(a) l weak (b) 2-3 week (c) Above 3 week

Do you think that DEMAT system is beneficial to you? (YES\NO) if
yes then, what are the benefits ?
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(b) If No what are the areas where your DP is lacking?
(a) Late services provided (b) More Amount charges
(c) More Time taken (d) Bad delivery
(e) Any other

How would you rate the depository service provided to you by your DP?

(a) Highly satisfied (b) Satisfied (c) Indifferent

(d) Dissatisfied (e) Highly dissatisfied
Give your views regarding the following statement:
Strongly agree \ Agree \ Neutral \ Disagree \ Strongly Disagree

Depository System over come the problems associated with physical

shares Account.
Depository system helps in immediate transfer of shares.
Depository system has eliminated the chances of bad delivery.
Dealing through Depository is costlier than physical shares.
What are the difficulties faced by you while dealing in depository mode ?
------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------

If giving an opportunity, where would you like to open a new DEMAT

account?
(a) With same old DP (LSE) (b) DP of Bank (c) Any other
DEMOGRAPHIC PROFILE
NAME:
ADDRESS:
OCCUPATION : (a) Businessman (b) Serviceman (c) Any
other
Income: (a) 50,000-1,00,000 (b) 1,00,000-1,25,000
(Annually) (c) 1,25,000-1,50,000 (d) Above 1,50,000

SUMMER TRAINING
 PROJECT REPORT
ON

DEPOSITORY
SYSTEM
Undertaken at :

Ludhiana Stock Exchange

Submitted in partial fulfillment of the requirement of degree
of
BACHELOR OF BUSINESS
ADMINISTRATION

SUBMITTED TO: SUBMITTED BY:

Panjabi University Gurpreet Kaur
Patiala B.B.A. 4th Sem
(2009-2010)

TARA VIVEK COLLEGE GAJJAN

MAJRA (MALERKOTLA)
PREFACE
 In order to make the students competent, all students are
requested to take a real time Project Work. This exposure to real life situation
given an insight to the students about what problem he can expect to face
during his/her career.

Efficient management of material, time and financial resources is

very important for the accomplishment of any objective. Above to this
coordination is must, which determines the degree of success. Theoretical
studies are not sufficient to understand the complexities of large scale
organisation and whenever we have to solve any problem the partial study
assist with the theoretical aspect in order to solve that problem so if we have
the practical knowledge than only that problem can be solved.

So in order to undergo for practical work I took my training at

Ludhiana Stock Exchange. At Ludhiana Stock Exchange I have done a Project
on " DEPOSITORY SYSTEM".

The present report is well arranged in a coherent manner. In

project first of all I have made the study of depository and banks and after that I
have made the comparative analysis of these two models.

An annexure at the end of this report shows a real scene of

explained matter and about some unexplained matter also.

Actually this report is a result of an assignment, to improve

myself and gain confidence. In this I have done my best to make it a genuine
study but as we all know a maxim "TO ERR IS HUMAN" so there is a chance
of mistakes.

ACKNOWLEDGEMENT
 One and half month of training at Ludhiana Stock Exchange was

a prolific experience. I was overwhelmed with the friendly, cooperative

attitude and erudite and information extended to me by everyone.

To start with, I wish to place my gratitude and sincere thanks to

Smt. Pooja M. Kohli (Executive Director), LSE for giving me the opportunity

do my summer training in this esteemed organization. The summer training

has provided me the knowledge of Capital Market reforms and working of

Stock Exchange.

My acknowledgement will be incomplete without expressing my

regards to my parents and my friends for their invaluable advice and co-

operation.

GURPREET KAUR
BBA (4TH SEM.)

CONTENTS
S. No. Title Page No.
1. Introduction 1-4
2. Depository Participants (CDSL & NSDL) 5-6
3. Legal Framework (Regulations of Depositories) 7-11
4. Functions 12-13
5. Records 14
6. Operations 15-19
7. Demat 20-22
8. Remat 23-25
9. Settlement 25-44
10. Data Analysis 46-54
11. Research Methodology 55-58
12. Limitations 59
13. Results and Discussion 59
14. Similarities 60
15. Conclusions 73
16. Bibliography 74
17. Questionnaire 75-76